“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”


Thus began bitcoin.


Bitcoin was created in response to the previous financial crisis. Satoshi Nakamoto was concerned that governments were forever bailing out wealthy shareholders with printed money. Satoshi created a form of money that could not be debased. People all around the world could save their earnings in bitcoin without fear of their savings being diluted by excessive money printing.


Satoshi appended that bailout headline from The Times (of London) in the first block of bitcoin — the so-called genesis block.


The most famous sentence in the opening paragraph of Genesis is “Fiat lux” — Latin for “Let there be light”. Bitcoin has brought light into a confused world of debased paper currencies, fractional-reserve banking implosions, remittance companies charging migrants a month’s wages, fiscal policies that benefit wealthy special interest groups. When we look back in fifty years, I think bitcoin will be seen as one of the most positive contributions to the world’s population of our era.


It’s also a beautiful coincidence in the use of the word “fiat”. Deities can just command that things be done. Mortals, not so much. You can’t command that fiat currencies have, or more specifically, retain their value. The more mortals mess with them, the more purchasing power fiat currencies lose. This graph shows the value of major fiat currencies (priced in gold — an asset/element whose quantity cannot be eased by dictate).



Like the Lascaux cave paintings from the Paleolithic, this is the bitcoin community’s earliest art — the genesis block itself:



Different than a stick buffalo, but beautiful in its own way.


“Bitcoin was born in a financial crisis. It will come of age in this one.”


Satoshi’s spirit lives on. The final block before the Halving contained this message:


Block 629999


“NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue”


That was a very cool move by the mining pool F2Pool (who verified/mined that final block). F2Pool founder Wang Chun said in an interview:


“History has repeated. Due to the coronavirus, there has been yet another ongoing wave of bailouts just like the one Satoshi had seen in 2008, but bigger in scale, like Bitcoin reinvented.”


F2Pool CMO Qingfei Li also added:


“With the changes in the global economic environment, central banks of various countries have gradually adopted aggressive Quantitative Easing policies. We have found that Mr. Satoshi Nakamoto’s concerns have been there and are getting more and more serious since the economic crisis of 2008.”


The event that got Satoshi riled up was so shocking to the editors of The Times that it warranted the entire front page of their newspaper.



Here’s the full context:


“A second bank rescue package totaling at least £50 billion was announced by the British government on 12 January 2009, as a response to the ongoing global financial crisis.”


I really miss the quaint old days when somebody could get really pissed off about a £50 billion bailout. So mad indeed, that he/she/it started a 50-million-person movement in response.



We’re in a whole new universe now. The U.S. government alone is now printing $50bn every four days. In a recent 60 Minutes interview, the Chair of the Federal Reserve Jerome Powell was abundantly clear in that there is literally no limit to the quantity of money they are willing to create:


“Well, there’s a lot more we can do. We’ve done what we can as we go. But I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have . . . .


“This economy will recover; it may take a while. It may take a period of time, it could stretch through the end of next year, we really don’t know.


“Assuming that there’s not a second wave of the coronavirus, I think you’ll see the economy recover steadily through the second half of this year.”


I’m concerned that a really smart central banker would say that. It seems obvious that there is no chance that the economy will have regained its record high so quickly. It took three years for GDP to return to its pre-crisis level after the 2008–9 recession. This pandemic is just so much bigger and more complicated.


Our Senior Advisor and my former Tiger partner Ron Glantz estimates that real GDP will fall at an incredible -41% seasonally adjusted annual rate (SAAR) in the second quarter, compared with a -5.0% SAAR in the first. While the economy should recover at an historically high rate, we will start off so far below the old level that it is likely to take four years for GDP to return to where it was in the fourth quarter of last year, before the virus affected our economy.


Similarly, it appears that annual GDP will also take four years to return to where it was last year.



The above graph shows the change in real GDP after the 2008–9 recession and a likely path in this recovery. The next shows the level of economic activity.



For me as a trader — that means more policy is inevitably coming. If the current policy stance is predicated on a belief that GDP will set new highs soon, it’s likely to come up short and will require more fiscal and monetary packages.


It seems that the inescapable conclusion must be: this repeated, and literally unlimited, use of fiscal and monetary expansion will dramatically push up the quantity of fiat money required to buy non-quantitatively-easible things — like bitcoin and other cryptocurrencies.



Corporate earnings are estimated to be down something like -70%. That the S&P 500 is only down 6% is proof the extra money is sloshing around the system with great force. The S&P 500 is above its level nine months ago. Nine months ago, the world looked much better than today.


As more and more stimulus packages come, crypto prices will likely rise — a lot.


As an aside, there is a very well-done graphic from the Atlanta Fed which shows the change in thinking among economists — juxtaposed with the Atlanta Fed’s real-time GDP estimate. This estimate is based on real-time economic data like consumer spending (PCE), net exports, and government spending. Economists have been slowly coming to grips with the extent of this crisis. However, the entire range of economists’ current forecasts is still above the point where even the most pessimistic 10 economists touch the Atlanta Fed’s real-time GDP forecast.


Their current real-time forecast is -43% SAAR (very similar to ours).



Atlanta Fed graphic: https://www.frbatlanta.org/cqer/research/gdpnow.


Chair Powell’s full 60-minute interview transcript can be found here.



In our March Investor Letter, we wrote:


“My best guess is that it will take institutional investors 2–3 months to triage their current portfolio issues. Another 3–6 months to research new opportunities like distressed debt, special situations, crypto, etc. Then, as they begin making allocations, those markets will really begin to rise.”


It’s beginning to happen. For example, legendary macro investor Paul Jones announced his purchase of bitcoin. Excerpts from his investor letter The Great Monetary Inflation:


“COVID-19 is a one-of-a-kind virus that has triggered a one-of-a-kind policy response globally . . . .



“One thing is for sure, there will be many assets that will move as a result of this money creation . . . .


“I am not a millennial investing in cryptocurrency, which is very popular in that generation, but a baby boomer who wants to capture the opportunity set while protecting my capital in ever-changing environments. One way to do that is to make sure I am invested in the instruments that respond first to the massive increases in global money. And given that Bitcoin has positive returns over the most recent time frames, a deeper dive into it was warranted . . . .


“At the end of the day, the best profit-maximizing strategy is to own the fastest horse. Just own the best performer and not get wed to an intellectual side that might leave you weeping in the performance dust because you thought you were smarter than the market. If I am forced to forecast, my bet is it will be Bitcoin . . . .


“I am not an advocate of Bitcoin ownership in isolation, but do recognize its potential in a period when we have the most unorthodox economic policies in modern history. So, we need to adapt our investment strategy. We have updated the Tudor BVI offering memoranda to disclose that we may trade Bitcoin futures for Tudor BVI. We have set the initial maximum exposure guideline for purchasing Bitcoin futures to a low single digit exposure percentage of Tudor BVI’s net assets, which seems prudent . . . .


“Bitcoin reminds me of gold when I first got in the business in 1976 . . . .”


Back-of-the-envelope calculation puts that around $400 million of approximately $26 billion AUM.


CME bitcoin futures provide a real-time proxy for the increase in institutional investment in bitcoin. Open interest recently surged to a record high.



On our Bitcoin Halving conference call, Co-Founder and CEO of Kraken Exchange Jesse Powell confirmed this inflection point:


“In the last two months, we’ve seen a huge surge in new accounts from institutions.”


In this new era of Unlimited Quantitative Easing it might be imprudent to **not** have some exposure to bitcoin.


One participant asked about the influx of global macro hedge funds:


Dan: “That’s a great question. There are a ton of old friends of mine from a global macro space that are now very active in the blockchain space. I think it’s because we’re trained to look for outsized, asymmetric bets. There are ways this thing could not work and you might lose one times your money, but you might make 20 times your money.


“Those trades just don’t come up very often. That’s why global macro traders are drawn to this space. Paul Jones is a super-well-respected investor who has been doing this since making his name in the ’87 stock market crash short a ton of S&P. He’s an incredible trader.


“It does go back to your generational question. When you get somebody of that generation adopting bitcoin it is something more than Millennials being crazed about it, right?”


Pantera Leads Coinme Series A


Pantera Venture Fund III’s latest investment, Coinme, recently announced the completion of their $10mm Series A round that will help fund expansion into the Latin American market. Coinme is an exchange API that interfaces with physical bitcoin ATMs and Kiosks — currently powering 20,000 locations around the US.


As non-essential businesses have been forced to remain closed during this pandemic, Coinme has been able to provide uninterrupted businesses as the vast majority of kiosks are located in supermarkets and pharmacies, some of the only brick-and-mortar stores that have remained open. Bitcoin transaction volume at Coinme kiosks is up 40% since late February when restrictions began taking place.


We’re excited to see Coinme bring bitcoin to the masses through infrastructure that is familiar to newcomers in the space.


For more information on Coinme and to find a bitcoin kiosk near you, visit their website here.



We want to share an excerpt of a piece written by one of our peers from Arca that we came across during our research. The author of the article, Jeff Dorman, had an interesting perspective:


“As Howard Lindzon said, ‘People say markets can’t move higher without the financials (banks) but maybe the new “banks” are what matter more.’


“He may be onto something. Below are the market caps of new finance companies compared to old finance.”




With the price roughly flat over the last two weeks, there’s a little bit of a “The Bitcoin Halving happened and all I got was this t-shirt” vibe in some of the comments. We have stressed that it is a big event — but it takes years to play out. The typical trough is 1.3 years before the Halving and, on average, the market peaks 1.2 years after. The whole process has taken 2.5 years.


There’s a ton of interest in the Halving — our Halving tweet generated 600,000 impressions on Twitter — so we hosted a special conference call to discuss it.



We invited bitcoin OGs Jeremy Allaire and Jesse Powell, Co-Founder and CEO at Circle and Kraken, respectively, to share their views on the Halving and take questions from our investors.



We want to share a couple of interesting perspectives. You can watch the video here. The transcript can be found in the appendix.


Q: Efficient Markets Theory would hold that if we **all** know it’s going to happen, then it has to be priced in. Is the Halving priced in? Does the Halving matter?


Jesse: “I don’t think bitcoin is even priced into bitcoin.


“I think that there’s a lot that’s not priced in, even though it’s predictable, like what the future is. Ten years down the road, the US dollar is going to continue to be printed like crazy. It’s going to be totally worthless. No one is going to want it. Everyone is going to want bitcoin. But that’s not priced in because of perceived risks or perceived uncertainty about the future, about regulation, about how does the government respond in different situations as bitcoin continues to develop, or how useful does it actually become?”


Q: What’s different about this Halving vs. ones in the past?


Jeremy: “Back in 2016, it was really hard to argue that ‘bitcoin was ready for primetime.’ But now, it’s pretty hard to argue that it’s not. I think, in the current backdrop with the ability for people and institutions to access this infrastructure, and this expansion curve of the actual legacy financial system, I think it’s going to lead to a really different next four years. I think that all those factors are going to be drivers for growth in value over the next four years as well.”


For an overview of what the “Bitcoin Halving” is and analysis on its potential effects on price, please see our April letter here.


In March we featured oil trading negative — how you had to pay someone to take it off your hands. It’s the same with fiat money. You have to pay somebody to take your paper money off your hands.





We invite you to join us on our upcoming Blockchain Growth In The Crisis conference call on June 2nd at 9:00am PDT / 12:00pm EDT.


Since the pandemic began, our portfolio companies have seen a +78% surge in blockchain-enabled money transfer, driven by increased demand for digital payments and cross-border remittance services.


We have invited the CEOs of Bitso and Coinme to join us for a panel discussion on what is working in blockchain today during this crisis. If you are interested in attending, please register below.



If you are interested in digging deeper on any of these themes or our funds, please contact Pantera’s Capital Formation team at +1–650–854–7000 or ir@panteracapital.com.

Stay safe,